UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
for the transition period from _______________ to ________________.
Commission File Number: 0-22390
-------------------
SHARPS COMPLIANCE CORP.
(Name of Small Business Issuer in its Charter)
DELAWARE 74-2657168
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9050 KIRBY DRIVE, HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
(713) 432-0300
Registrant's telephone number
Securities Registered under 12(g) of the Exchange Act: TITLE OF EACH CLASS
-------------------
Common Stock, $0.01
Par Value
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X] No[ ]
Number of shares outstanding of the issuer's Capital Stock as of February 12:
8,626,444
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-March 31,
2001 (Unaudited) and June 30, 2000...................... 3
Unaudited Condensed Consolidated Statements of
Operations - For the three months ended
March 31, 2001 and 2000................................. 4
Unaudited Condensed Consolidated Statements of
Operations - For the nine months ended
March 31, 2001 and 2000................................. 5
Unaudited Condensed Consolidated Statements of
Cash Flows - For the nine months ended
March 31, 2001 and 2000................................. 6
Notes to Unaudited Condensed Consolidated
Financial Statements ................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings ........................................... 11
Item 6. Exhibits and Reports on Form 8-K ............................ 11
SIGNATURE............................................................ 12
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
ASSETS 2001 2000
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 26,874 $ 153,346
Short-term investments ....................................................... 325,000 40,984
Accounts receivable, net ..................................................... 681,828 794,643
Inventory .................................................................... 315,500 221,105
Prepaids and other ........................................................... 37,703 80,831
----------- -----------
Total current assets .............................................. 1,386,905 1,290,909
PROPERTY AND EQUIPMENT, net .................................................... 240,656 180,736
INTANGIBLE ASSETS, net ......................................................... 45,552 60,736
NOTE RECEIVABLE FROM STOCKHOLDER ............................................... 320,000 320,000
----------- -----------
Total assets ...................................................... $ 1,993,113 $ 1,852,381
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ............................................................. $ 505,263 $ 354,538
Accrued liabilities .......................................................... 106,730 129,087
Accrued disposal costs ....................................................... 610,361 1,371,193
Deferred revenue ............................................................. 79,117 --
Current maturities of notes payable .......................................... 23,758 64,718
----------- -----------
Total current liabilities ......................................... 1,325,229 1,919,536
NOTES PAYABLE, net of current portion .......................................... 4,298 8,780
LONG TERM ACCRUED DISPOSAL, net of current portion ............................. 215,336 --
LONG TERM DEFERRED REVENUE, net of current portion ............................. 26,113 --
----------- -----------
Total liabilities ................................................. 1,570,976 1,928,316
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value per share; 1,000,000 shares authorized;
-0- shares issued and outstanding ....................................... -- --
Common stock, $.01 par value per share; 20,000,000 shares authorized;
8,626,444 and 7,626,444 shares issued and outstanding, respectively ..... 86,264 76,264
Additional paid-in capital ................................................... 5,382,188 4,392,188
Accumulated deficit .......................................................... (5,046,315) (4,544,387)
----------- -----------
Total stockholders' equity (deficit) .............................. 422,137 (75,935)
----------- -----------
Total liabilities and stockholders' equity (deficit) .............. $ 1,993,113 $ 1,852,381
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
3
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
2001 2000
----------- -----------
REVENUES:
Distribution, net .................. $ 1,148,948 $ 915,582
Consulting services ................ 2,160 42,790
Environmental ...................... 31,679 --
----------- -----------
Total revenues ................. 1,182,787 958,372
COSTS AND EXPENSES:
Cost of revenues ................... 209,599 551,824
Selling, general and
administrative ................... 764,206 758,367
Depreciation and amortization ...... 25,807 25,540
----------- -----------
Operating income (loss) ....... 183,175 (377,359)
INTEREST INCOME, net ................. 1,539 9,047
----------- -----------
Net income (loss) .............. $ 184,714 $ (368,312)
=========== ===========
BASIC AND DILUTED NET INCOME
(LOSS) PER SHARE ..................... $ .02 $ (.05)
=========== ===========
SHARES USED IN COMPUTING NET
INCOME (LOSS) PER SHARE,
BASIC AND DILUTED .................. 8,626,444 7,626,444
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
4
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS
ENDED MARCH 31,
------------------------------
2001 2000
----------- -----------
REVENUES:
Distribution, net .................. $ 3,155,827 $ 2,879,495
Consulting services ................ 87,860 114,140
Environmental ...................... 75,596 --
----------- -----------
Total revenues ................. 3,319,283 2,993,635
COSTS AND EXPENSES:
Cost of revenues ................... 1,470,438 1,722,442
Selling, general and
administrative ................... 2,290,499 2,301,924
Depreciation and amortization ...... 80,469 74,576
----------- -----------
Operating loss ................. (522,123) (1,105,307)
INTEREST INCOME, net ................. 20,195 35,625
----------- -----------
Net loss ....................... $ (501,928) $(1,069,682)
=========== ===========
BASIC AND DILUTED NET LOSS PER
SHARE .............................. $ (.06) $ (.14)
=========== ===========
SHARES USED IN COMPUTING NET
LOSS PER SHARE, BASIC AND
DILUTED ............................ 8,400,167 7,626,444
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
5
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED MARCH 31,
--------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $ (501,928) $(1,069,682)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization ....................... 80,469 66,326
Amortization of deferred compensation ............... -- 8,250
Changes in operating assets and liabilities-
(Increase) decrease in accounts receivable .......... 112,815 (232,259)
Increase in inventory ............................... (94,395) (112,619)
Decrease in prepaids and other current assets ....... 43,128 50,298
Increase in accounts payable and
accrued liabilities ........................... 128,368 108,175
Increase (decrease) in accrued disposal costs ....... (545,496) 325,738
Increase in deferred revenue ........................ 105,230 --
----------- -----------
Net cash used in operating activities .............. (671,809) (855,773)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .................. (125,205) (29,007)
Sales of short-term investments ...................... 715,984 1,300,000
Purchases of short-term investments .................. (1,000,000) (122,000)
----------- -----------
Net cash provided by (used in) investing activities (409,221) 1,148,993
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable ............................ (45,442) (21,651)
Issuance of common stock ............................. 1,000,000 --
----------- -----------
Net cash provided by (used in) financing activities 954,558 (21,651)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .......................................... (126,472) 271,569
CASH AND CASH EQUIVALENTS, beginning of period .......... 153,346 15,452
----------- -----------
CASH AND CASH EQUIVALENTS, end of period ................ $ 26,874 $ 287,021
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
1. ORGANIZATION AND BACKGROUND:
ORGANIZATION
The accompanying condensed consolidated financial statements include the
accounts of Sharps Compliance Corp. ("SCC") (formerly U.S. Medical Systems,
Inc.) and its wholly owned subsidiaries, Sharps Compliance, Inc. of Texas, dba
Sharps Compliance, Inc. ("SCI"), Sharps e-Tools.com, Inc. ("Sharps e-Tools"),
and Sharps Environmental Services, Inc., dba Sharps Environmental Services of
Texas, Inc. ("Sharps Environmental Services") (collectively, "Sharps" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
BUSINESS
Sharps focuses on developing cost-effective, logistical and educational
solutions for healthcare and non-healthcare institutional markets. These
solutions include the Sharps Disposal by Mail(TM) System, Trip LesSystem(TM),
Pitch It(TM) IV Poles, Sharps e-Tools and Sharps Environmental Services. Sharps
products and services are provided primarily to create cost and logistical
efficiencies. These products and services facilitate compliance with state and
federal regulations by tracking, incinerating and documenting the disposal of
medical waste. Additionally, these services facilitate compliance with education
and training as set forth by federal, state, local and regulatory agencies.
Waste generators who use the Sharps Disposal by Mail (TM) System are responsible
for mailing the systems to the Sharps Environmental Services Resource Recovery
Facility (the "Disposal Facility") for incineration. Effective July 1, 2000, the
Company entered into an agreement with the City of Carthage, Texas and Panola
County (collectively, the "City") to manage and operate the Disposal Facility.
The length of the agreement is three years, and Sharps is responsible for
maintaining the Disposal Facility as required by federal, state, local and/or
regulatory agencies. Prior to July 1, 2000, Sharps paid the City to perform the
incineration function. Sharps is also responsible for paying the postage costs
associated with the Sharps Disposal by Mail (TM) System being mailed to the
Disposal Facility by the waste generators.
Prior to July 1, 2000, Sharps recorded accrued disposal costs for both postage
and incineration based on the number of Sharps Disposal by Mail(TM) Systems sold
that management estimated would eventually be returned for incineration.
However, subsequent to June 30, 2000, Sharps began accruing only for estimated
postage costs as the Company assumed operation of the Disposal Facility
effective July 1, 2000. For sales subsequent to June 30, 2000, deferred revenue
is recorded for non-refundable payments received for which the incineration
services have not been performed (See Note 3), and incineration costs are
expensed as incurred. Sharps estimates returns of the Sharps Disposal by
Mail(TM) Systems based on historical experience. Accrued disposal costs are
adjusted prospectively for revisions in the estimated disposal costs and return
rate, if any. Depending upon the experience of Sharps, such revisions could be
significant. During the quarter ended March 31, 2001, the Company completed an
analysis of its accrued disposal liability on a historical basis and recorded a
reduction of the liability of $540,996. During the quarter ended March 31, 2001,
the Company reclassified a portion of its disposal liability as long-term, based
on management's estimate of when returns of the Sharps Disposal by Mail System
will occur. During the nine months ended March 31, 2001 and 2000, the Company
accrued $525,380 and $680,000, respectively, for estimated disposal costs and
funded $529,880 and $354,000, respectively, of actual disposal costs.
Sharps continues to sole-source each of its transportation and software
development functions. Sharps may be affected by its dependence on the suppliers
of these functions. Management believes the risk is mitigated by the
long-standing business relationships with and reputation of Sharps' suppliers.
The Company also has entered into agreements, effective July 2000, with a
strategic partner to provide online education programs related to the Company's
e-Tools service line and, as discussed above, the City to manage and operate the
Disposal Facility. Although there are no assurances with regard to the continued
future business associations after expirations of certain agreements between
Sharps and its suppliers, management believes that alternative sources would be
available at similar costs due to the generic nature of the products and
services offered.
7
Sharps has incurred significant losses from operations since its inception and
has had working capital deficits in the past. Sharps expects to continue to
incur substantial costs related to sales, marketing and administrative
activities. There can be no assurance that Sharps will ever attain profitable
operations or will be able to generate sufficient revenue levels to support
operations. The future success of Sharps is dependent upon many factors,
including environmental regulation, continuity of its distributorship
agreements, successful completion of its product development activities and the
identification and penetration of additional markets for its products and
services. Management believes that the Company's current resources will be
sufficient to fund operations through fiscal year 2001. However, if the Company
is unable to achieve its projected sales or cash flows from operations, the
Company may require additional financing to meet its operating cash flow needs.
Management believes that it will be successful in raising such financing, if
necessary; however there can be no assurance that the Company will be able to
obtain financing on acceptable terms. The Company has been advised by its
independent public accountants that their report on the June 30, 2001, financial
statements may be modified with respect to the Company's ability to continue as
a going concern.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and, accordingly, do not include all information and
footnotes required under accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, these
interim condensed consolidated financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the financial position of the Company as of March 31, 2001 and
the results of its operations and its cash flows for the nine months ended March
31, 2001 and 2000. The results of operations for the nine months ended March 31,
2001, are not necessarily indicative of the results to be expected for the
entire fiscal year ending June 30, 2001. These condensed consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-KSB for the year ended June 30, 2000.
3. REVENUE RECOGNITION
Sharps has adopted Staff Accounting Bulletin No. 101, "Revenue Recognition"
("SAB No. 101"), which provides guidance related to revenue recognition based on
interpretations and practices followed by the Securities and Exchange
Commission. Adoption of SAB No. 101 did not have a material effect on the
Company's financial position or results of operations, although its revenue
recognition has been modified for a change in business that occurred in July
2000 (See Note 1).
Prior to July 1, 2000, product sales were recognized as revenue when the Sharps
Disposal by Mail(TM) System was delivered and accepted by the customer.
Effective July 1, 2000, the Company assumed responsibility for operation of the
Disposal Facility and, accordingly, began deferring a portion of the product
sales revenue associated with providing the incineration service. Deferred
revenue is recognized when the Sharps Disposal by Mail(TM) Systems sold are
returned to the Disposal Facility and incinerated. The deferral amount is based
on objective evidence of fair value for the incineration function, based on
sales of this service to other third parties. Further, the deferral amount is
based on the number of Sharps Disposal by Mail(TM) Systems that management
estimates will eventually be incinerated at the Disposal Facility. Deferred
revenue will be adjusted prospectively for revisions in the estimated return
rate, if any. Depending upon the experience of the Company, such revisions could
be significant.
4. STOCKHOLDERS' EQUITY
On August 31, 2000, the Company completed a private placement of 1,000,000
shares of its common stock for proceeds of $1,000,000.
8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
AND INFORMATION RELATING TO SCC AND ITS SUBSIDIARIES THAT ARE BASED ON THE
BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS
REPORT, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE" AND "INTEND" AND WORDS OR
PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO SCC OR ITS SUBSIDIARIES OR COMPANY
MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
REFLECT THE CURRENT RISKS, UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN
FACTORS INCLUDING, WITHOUT LIMITATIONS, COMPETITIVE FACTORS, GENERAL ECONOMIC
CONDITIONS, CUSTOMER RELATIONS, RELATIONSHIPS WITH VENDORS, GOVERNMENTAL
REGULATION AND SUPERVISION, SEASONALITY, DISTRIBUTION NETWORKS, PRODUCT
INTRODUCTIONS AND ACCEPTANCE, TECHNOLOGICAL CHANGE, CHANGES IN INDUSTRY
PRACTICES, ONETIME EVENTS AND OTHER FACTORS DESCRIBED HEREIN. BASED UPON
CHANGING CONDITIONS, SHOULD ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL
RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS ANTICIPATED,
BELIEVED, ESTIMATED, EXPECTED OR INTENDED. THE COMPANY DOES NOT INTEND TO UPDATE
THESE FORWARD-LOOKING STATEMENTS.
GENERAL
The Company's revenues were approximately $1,183,000 for the quarter ended March
31, 2001, compared to revenue of approximately $1,147,000 for the quarter ended
December 31, 2000. The Company's revenues increased by $36,000 for the quarter
ended March 31, 2001 over the immediately preceding quarter. The increase in
revenues is attributed primarily to the increased acceptance of the Company's
Sharps Disposal by Mail(TM) Systems and Trip LesSystem(TM). The Company expects
that its results of operations will continue to fluctuate between periods based
upon the timing and level of sales to distributors.
Selling, general and administrative expenses decreased by approximately $45,000
to $764,000 for the quarter ended March 31, 2001 from $809,000 for the quarter
ended December 31, 2000.
The Company reported a net income of $184,714 or $0.02 per share in the quarter
ended March 31, 2001, compared to a net loss of ($407,815) or ($0.05) per share
in the quarter ended December 31, 2000. The change in net income (loss) was
substantially all due to a revaluation adjustment to the Company's accrued
disposal liability. During the quarter ended March 31, 2001, the Company
completed an analysis of its accrued disposal liability based on management's
review of historical experience and recorded a reduction of the liability of
$540,996.
The Company introduced a new product, the SureTemp Tote(TM), to our existing
customer base. SureTemp Tote(TM) is a NEW patented system for shipping items
that must travel in a temperature-controlled environment. Preliminary feedback
from customers has been positive. The Company believes that the opportunity
within the current healthcare customer base is significant, with nearly 100% of
our customers using a cold shipping system on a daily basis.
On April 27, 2001, the Company announced that it is initiating a pilot program
with Waste Management, Inc. to facilitate the use of safe disposal systems for
individuals who use needles and syringes in their home. Under the program, Waste
Management will make the Sharps Disposal by Mail(TM) System available to Waste
Management's customers initially in Orange County, CA., Denver, CO., and
Orlando, FL.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
the Company's Condensed Consolidated Financial Statements of Operations,
expressed as a percentage of revenue:
9
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2001 2000 2001 2000
----------- ---------- ---------- ---------
Net revenues 100% 100% 100% 100%
Costs and expenses:
Cost of revenues (18%) (58%) (44%) (58%)
Selling, general and
administrative (65%) (79%) (70%) (77%)
Depreciation and amortization (2%) (2%) (2%) (2%)
---- ---- ---- ----
Total operating expenses (85%) (139%) (116%) (137%)
---- ---- ---- ----
Income (Loss) from operations 15% (39%) (16%) (37%)
Total other income 1% 1% 1% 1%
---- ---- ---- ----
Net Income (Loss) 16% (38%) (15%) (36%)
==== ==== ==== ====
QUARTER ENDED MARCH 31, 2001 COMPARED TO QUARTER ENDED MARCH 31, 2000
The Company's distribution revenues were approximately $1,149,000 for the
quarter ended March 31, 2001, compared to distribution revenues of approximately
$916,000 for the quarter ended March 31, 2000. The increase in revenues is
attributed primarily to the increased acceptance of the Company's Sharps
Disposal by Mail(TM) Systems and Trip LesSystem(TM). The increase was partially
offset by the net deferral of $26,000 of incineration revenue for this quarter
period resulting from the Company assuming operation of the Panola County
Resource Recovery Facility effective July 1, 2000. Prior to July 1, 2000, such
revenue was recognized at the time the Sharps Disposal by Mail(TM) Systems were
delivered and accepted by the customer, as the Company had no significant
further service obligation for incineration. The Company expects that its
results of operations will continue to fluctuate between periods based upon the
timing and level of sales to distributors.
Environmental revenue was approximately $32,000 for the quarter ended March 31,
2001, compared to none for the quarter ended March 31, 2000, resulting from the
Company assuming the operations of the Panola County Resource Recovery Facility
effective July 1, 2000. The Company began incinerating third-party waste at the
facility in August 2000.
Consulting services revenue decreased to approximately $2,000 for the quarter
ended March 31, 2001, from approximately $43,000 for the quarter ended March 31,
2000. The decrease in consulting service revenue is due to the phase out of the
service line by the Company.
Selling, general and administrative expenses increased by $6,000, to
approximately $764,000 for the quarter ended March 31, 2001 from approximately
$758,000 for the quarter ended March 31, 2000. The additional expenses primarily
result from the additional overhead related to the start up of Sharps e-Tools.
The Company reported a net income of $184,714 or $0.02 per share in the quarter
ended March 31, 2001, compared to a net loss of ($368,312) or ($0.05) per share
in the quarter ended March 31, 2000. During the quarter ended March 31, 2001,
the Company completed an analysis of its accrued disposal liability on a
historical basis and recorded a reduction of the liability of $540,996 (see
above discussion).
NINE MONTHS ENDED MARCH 31, 2001 COMPARED TO NINE MONTHS ENDED MARCH 31, 2000
The Company's distribution revenues were approximately $3,156,000 for the nine
months ended March 31, 2001, compared to distribution revenues of approximately
$2,879,000 for the nine months ended March 31, 2000. The increase in revenues is
attributed primarily to the increased acceptance of the Company's Sharps
Disposal by Mail(TM) Systems and Trip LesSystem(TM). The increase was partially
offset by the deferral of $105,000 of incineration revenue for this nine month
period resulting from the Company assuming operation of the Panola County
Resource Recovery Facility effective July 1, 2000. Prior to July 1, 2000, such
revenue was recognized at the time the Sharps Disposal by Mail(TM) Systems were
delivered and accepted by the customer, as the Company had no significant
further service obligation for incineration. The Company expects that its
results of operations will continue to fluctuate between periods based upon the
timing and level of sales to distributors.
10
Environmental revenue was approximately $76,000 for the nine months ended March
31, 2001, compared to none for the nine months ended March 31, 2000, resulting
from the Company assuming the operations of the Panola County Resource Recovery
Facility effective July 1, 2000. The Company began incinerating third-party
waste at the facility in August 2000.
Consulting revenue decreased from approximately $114,000 for the nine months
ended March 31, 2000, to approximately $88,000 for the nine months ended March
31, 2001. The decrease in consulting service revenue is due to the phase out of
the service line by the Company.
Selling, general and administrative expenses decreased to approximately
$2,290,000 for the nine months ended March 31, 2001 from approximately
$2,302,000 for the nine months ended March 31, 2000.
The Company reported a net loss of ($501,928) or ($0.06) per share in the nine
months ended March 31, 2001, compared to a net loss of ($1,069,682) or ($0.14)
per share in the nine months ended March 31, 2000. During the quarter ended
March 31, 2001, the Company completed an analysis of its accrued disposal
liability on a historical basis and recorded a reduction of the liability of
$540,996 (see above discussion).
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company had approximately $352,000 in cash and
short-term investments. During the quarter ended March 31, 2001, cash used in
operations was $82,000. On August 31, 2000, the Company significantly improved
its working capital position through the completion of a private placement of
1,000,000 shares of its common stock for proceeds of $1,000,000.
Capital expenditures during the nine months ended March 31, 2001 were
approximately $125,000 and consisted primarily of purchases of computers,
computer software development and improvements to the Disposal Facility.
At March 31, 2001, total long-term debt outstanding was approximately $4,300 for
the Company. Additionally, the Company analyzed the historical return results
and the portion of the accrued disposal and deferred revenue not expected to be
incurred within one year has been classified as long term liability at March 31,
2001, $215,336 and $26,113, respectively.
Sharps has incurred significant losses from operations since its inception. The
future success of Sharps is dependent upon many factors, including environmental
regulation, continuity of its distributorship agreements, successful completion
of its product development activities and the identification and penetration of
additional markets for its products and services. Management believes that the
Company's current resources will be sufficient to fund operations through fiscal
year 2001. However, if the Company is unable to achieve its projected sales or
cash flows from operations, the Company may require additional financing to meet
its operating cash flow needs. Management believes that it will be successful in
raising such financing, if necessary; however there can be no assurance that the
Company will be able to obtain financing on acceptable terms.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Sharps is involved in certain legal actions and claims arising in the normal
course of business. While the outcome of these matters cannot be predicted with
certainty, management believes these matters will not have a material adverse
effect on Sharps' consolidated financial position, results of operations or
liquidity.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
The following exhibit is filed as part of this report.
11
EXHIBIT NO. DESCRIPTION
---------- ---------------
27.1 Financial Data Schedule (filed herewith)
b) Reports on Form 8-K
None.
ITEMS 2, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
REGISTRANT:
SHARPS COMPLIANCE CORP.
Dated: May 14, 2001 By:: /s/ GARY L. SHELL
----------------------------
Vice President and Chief
Financial Officer
Dated: May 14, 2001 By:: /s/ DR. BURT KUNIK
----------------------------
President and Chief Executive Officer
12